The Australian environment is complex and varied with many unique components, and it underpins many ecological, social and economic systems. Due to human pressures, environmental problems have arisen. The recent drought conditions experienced in what is already the driest inhabited continent has highlighted the importance and value of water and water resources. Accordingly, there has been an increased emphasis on how water resources are used and managed. This chapter provides information on some of the practices and consequences of water supply and use; water stocks; household water conservation; greenhouse gas emissions; waste management; and environmental assets.

The chapter starts with a description of the supply and use of water in the Australian economy. Water consumption varies between states and territories as well as by industry group. Particular focus is given to water consumption in the agriculture industry, being the largest consumer of water. The section also looks at water stocks, focusing specifically on surface water stocks, sustainable yield groundwater, and large dams.

Since 2001 there has been a significant reduction in water storage levels of reservoirs across Australia which led to imposition of water restrictions in most capital cities. How Australians cope with water restrictions and drought is also explored in this chapter.

There is widespread national and international concern that human activities are increasing atmospheric concentrations of existing greenhouse gases and that these gases are linked to global warming and climate change. The section on greenhouse gas emissions provides estimates of Australia's greenhouse gas emissions per person, by sector, and by state and territories.

Under the environmental assets section, information on Australia's total assets and environmental assets are provided, along with measures of depletion of subsoil assets and land degradation. Adjustments to production, income, and growth figures for the Australian national accounts are also given.